From the growers to the dispensers, the investors to the politicians, and the green in your bong to the green in their pockets, we're interpreting the detailed happenings in the budding wide world of business.
The SF Gate published a story over the weekend entitled "When it comes to marijuana, many VCs still won't inhale" in which Justin Hartfield discusses his experience in launching the wildly successful WeedMaps.com in 2010 and how Silicon Valley -- despite describing themselves as "disruptive" -- would not under any circumstances get involved with a cannabis-related business.
"Silicon Valley is totally out of touch," he said to the publication. "There's no dispensaries on Sand Hill Road."
Moreover, back in 2010, a pissed off Hartfield went on to recall to TechCrunch through email that one investor -- Tim Draper of the venture capital firm Draper Fisher Jurvetson -- seemed interested for a while, but proceeded to with a note saying he was backing out:
Segment of an email sent by Justin Hartfield to TechCrunch in August 2010
"WeedMaps has gone on a funding tour of Silicon Valley, engaging with high profile venture capital firms like Draper, Fisher, Jurvetson, Oak Investments, True Venture, top tier legal firms and several white-shoe accounting firms.
But for all the Sand Hill rhetoric about creating innovation and fostering disruptive technologies, the general consensus is that Sand Hill is not yet ready for legalized marijuana. After courting WeedMaps for three weeks, Draper officially passed on the business, but offered this to WeedMaps founder Justin Hartfield, “I am going to chicken out. You have an awesome business, and it will probably be worth a ton someday, but I can’t pull the trigger. Sorry,
A lot has changed since 2010, but it seems the SF Gate story has stirred up some animosity between cannabis entrepreneurs and the investors too afraid to jump in the battle with them. Despite not responding initially, Draper finally got back to the writer after the piece went live over the weekend and offered this as a response:
"Sorry, back to you late for the story. There is no barrier to entry -- anyone can start a cannabis company -- and it is still illegal. The quotes came from an entrepreneur who was angry that he wasn’t getting funded. -- Tim"
Interesting. WeedMaps is making north of $25 million a year according to their own figures and Draper could have been in on that money. So was it he who was really angry that he didn't have the cojones to pull the trigger on it?
According to the National Venture Capital Association, of the $8.5 billion of venture funding in Silicon Valley and SF last year just $51 million was invested in cannabis-related businesses over the past five years. That's a drop in the ocean compared to other booming industries of which marijuana is on par with. So what is it that investors are afraid of -- the government cracking down? Probably some, considering cannabis is still a Schedule I drug and the federal government is happy to crack down whenever it's not getting its cut of the green. Yet, it sounds like even more are fearing that they cannot trust entrepreneurs in the cannabis industry with their money. It's a case of flat-out stoner stereotypes.
It hasn't stopped cannabusinesses from thriving, but it may be stopping them from gaining the investments that they rightfully deserve and could be making a hefty return. Just another hurdle to leap over and it's one that I don't see standing for much longer.
I see more creative entrepreneurs jumping in with great new products and services and thus the investors will have no choice but to abandon their stereotypes and join the party lest they miss out on the green.